Tokyo is immersed in sanctions work against Russia, but real life forces Japan to compromise its ‘principles’ and cooperate with Moscow, Russian Deputy Foreign Minister Andrey Rudenko told the Izvestia newspaper in an interview on Tuesday.
"It is quite obvious to us that official Tokyo is unquestioningly fulfilling Washington's political order by fully engaging in the sanctions work. However, practice shows that real life makes the Japanese authorities compromise their detached from national interests ‘principles’ in the spheres where they cannot do without cooperation with Russia," he said.
Rudenko pointed out that the Japanese authorities recommended the local companies - the shareholders of Sakhalin-1 and Sakhalin-2 oil and gas projects - to continue participating in the projects under the pretext of ensuring the country's energy security. "Fumio Kishida's administration begged his G7 partners to remove crude oil flowing to Japan from the Sakhalin-2 project from a restrictive scheme involving a price cap on Russian-origin energy carriers," the diplomat added.
Russia approves Japan's SODECO participation in new Sakhalin 1 oil, gas project operator
The Russian government has approved Japan's Sakhalin Oil and Gas Development Co., or SODECO's participation in the new operator of Sakhalin 1 oil, gas project, Japan's Chief Cabinet Secretary Hirokazu Matsuno said Nov. 15, a move Tokyo sees significant for the country's energy security.
"We are aware about the Russian government's decision to approve SODECO's participation in the new Sakhalin 1 company," Matsuno told a press conference. "We see this decision extremely significant from the perspective of our country's mid- to long-term stable energy supply."
Japan sees an equity stake in the Sakhalin 1 oil, gas project important as it relies around 95% on Middle Eastern oil imports.
Japan, however, recorded no Russian crude imports for the fourth consecutive month in September as the country's top two refiners, ENEOS and Idemitsu Kosan, have already suspended signing new Russian crude contracts.
Matsuno's comments come as a Russian government ordinance has been issued to transfer SODECO's 30% stake to the new Sakhalin 1 operator, according to a Japanese government source.
The new Russian operator, named Sakhalin 1, was added to the Russian register of legal entities Oct. 14. Rosneft subsidiary Sakhalinmorneftegaz-Shelf has been appointed to manage the new entity.
Foreign partners were given one month to apply to the Russian government to keep their stakes in the project.
Press Conference by Minister Hagiuda
Tuesday, May 10, 2022, Press Conference Room, METI
Question: Prime Minister Kishida stated at the G7 leaders’ meeting that Japan would impose a general embargo on Russian oil. What are your thoughts on how such an embargo will be implemented? The Prime Minister has also said that Japan will maintain its interests in Sakhalin. Is it possible to stop importing Russian oil completely while maintaining such interests?
Answer : Although this was a very tough decision as Japan relies almost entirely on imported oil, solidarity with the G7 is now of the utmost importance. Therefore, based on the recent G7 Leaders’ Statement, we have decided to enact a general embargo on Russian oil.
However, we cannot immediately embargo Russian oil. Instead, we are committed to gradually reducing dependency on Russia for energy in a timely and orderly manner while securing alternate supply sources.
Moving forward, we will establish a concrete method and timeframe for reducing and ultimately stopping these oil imports considering actual conditions. With regard to oil imports from the projects in which Japan has interests, as they are contributing to our low-cost, long-term stable energy supply, we will take time to consider how we can phase out these imports with minimal impact on citizen's lives and business operations.
Question : I have a question about the oil embargo.
I understand that Japan will maintain its interest in Sakhalin-1, and even if Japan halts these imports in the future, SODECO (Sakhalin Oil and Gas Development Co.)—in which METI and Japanese companies have interests—will have to continue selling crude oil produced from the project. How does METI intend to sell the crude oil that comes from Sakhalin-1 moving forward?
Answer : We have had to make a tough decision this time, but solidarity with the G7 is important. Considering the G7 Leaders’ Statement, we have decided on the Russian oil embargo. As I said earlier, we cannot do it immediately. Instead, our goal is to gradually phase out our dependence on Russia for energy in a timely and orderly manner while securing alternate supply sources.
I assume that the oil will be sold to neighboring countries—such as South Korea—in addition to Japan. I will refrain from giving any more details at this point in time because any speculation might cause adverse effects on related companies’ ordinary profits.
Question : How do you think this embargo will affect Japan's industry? Profits of oil companies and trading houses are expected to hit an all-time high. Please tell us how this will impact the industry.
Answer : It will obviously have a large impact on the business community. I believe that most citizens understand our overall policy of looking to enact the embargo, but there may be various negative impacts, which we have not clearly understood yet.
As I mentioned in an on-the-move interview yesterday, if countries decide to embargo Russian oil, they will have to compete for the alternatives to those imports. We are asking oil-producing countries to increase production, but as I have said before, those countries are questioning whether we will continually buy the increased amounts they produce.
Japan, at least, has said that it will continue using the increased amounts. We intend to keep using a certain amount of oil while working toward carbon neutrality by utilizing technology to reduce CO2 emissions. However, if European countries or others suddenly strengthen their embargo as the situation changes, they may ask oil-producing countries to increase their production and only buy that increased amount for a certain period of time. This would be a problem for those oil-producing countries. Given this situation, I think it is undeniable that the oil embargo will likely have a significant impact on the economy and the market.
Right now, I am telling citizens that the overall direction for Japan is to enact this embargo. I think the general public may have the understanding that this was an unavoidable decision when considering our future relationship with Russia.
However, I think we also need to explain to them at some point that energy prices will spike as a result of this. Otherwise, they won't be able to accept our country's policies. There are many people who say brave things, but we need to protect the daily lives of citizens and Japan's economy. The embargo is a commitment we have made to the international community, and we are having difficult discussions about how best we can protect the lives of our citizens and our economy with the Agency for Natural Resources and Energy.
If we could not actually put pressure on Russia, there is no point in doing it. If we withdraw from the Sakhalin project quickly, our interest may be transferred to a third country. Another problem is that if we embargo Russian crude oil, it could be coming into the market via other countries by way of oil laundering. In that case, it would be very difficult to determine whether the oil is of Russian origin.
Therefore, while I am not denying the G7 commitment to take this direction, each country needs to stay alert and run various simulations to figure out what practical problems need to be taken care of. Otherwise, what we are doing now might become a big advantage for Russia, and these sanctions will have been for nothing. Thus, we must keep up our calm response. At the same time, we will do our best to minimize the impact this may have on companies.
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